George: I got into this deal for two reasons, first the arbitrage situation (when OPEN was selling at a 30% discount to the floor valuation of the merger) and because I think that BORL was absolutely correct in making the offer.
When a company reviews its long term strategy and as a result decides that thier product line should address additional markets in which they have no presence, or even additional markets that their evaluation shows will have far superior growth rate, or in this case markets that will take them out of the way of a running freight train (MSFT), it then has an additional decision, it is the same as in manufacturing, a "Make or Buy" decision. In this case, Borland could have spent 3 to 5 years to learn the market, come up with a product line and establish a customer base. They must have compared the expenditure and the lost opportunity (3 years is a long time in the life of a software company) cost to the acquisition costs and decided that it is cheaper and get them faster to market to do the acquisition.
If you think that BORL and OPEN did not know of the impending weakness in their respective businesses at the time of the new deal (.66) and the future potential of the combined business, then you think that these management teams are absolute idiots, and instead of suing them and telling them what to do, you should not be a shareholder.
If you do not think that the stock will be substantially higher in the next few months, you should take your losses and run, since it is quite clear that you are unhappy with this investment. If you are right and this deal unecessarily dilutes your position in BORL, you have a good opportunity to recoup some of your losses at the current price. Do it and sleep well.
By the way, who do you think benefits more from the new deal relative to the old deal (.51 with a floor or .66 with no floor nor ceiling?), who pushed for the new deal, and who had to give in? The deal in essence lowered the floor to about 9.5 for BORL's shares and if BORL goes above that price, then OPEN's shareholders get more for their shares than on the prior deal. This indicates to me that OPEN's people were the one unhappy with the prior deal and BORL decided that they really need the deal bad enough to offer the additional 30% premium to the first deal. If OPEN thought that BORL stock will not go above about 9.5, then they would have stayed with the other deal. Remeber at the time of the original deal, BORL probably said that their stock is very likely to improve by more than 20% from their yearly high (thus the top collar at 25) and not go under 12.5, and they were wrong as well.
You are painting OPEN's business as a poor business, the fact is that this business can blow up (to BORL's benefit) once it is well packaged and marketed (with BORTL expertise) in markets where BORL had no prior standing. This whether or not a white knight comes to the rescue. I think that the various ML funds that now own 15% of BORL have gone through the same analysis and decided that the acquisition is good and fair (they bought an additional 5% after the anouncement) and that BORL is an excellent long term investment.
Good luck to you,
Zeev
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